In February, the state of Hawaii, which is one of the states running its own health insurance exchange under Obamacare, confirmed that, like most other states and the federal government, it would be opening its exchange for a special enrollment period during the six weeks after tax season.
The somewhat unexpected idea, which originated a few months ago with congressional Democrats, was to allow individuals hit with a tax penalty for not carrying insurance last year to sign up for this year, and avoid another penalty as a result. The federal government, always amenable to implementation alterations that might boost Obamacare's sign-up numbers, announced that the federally run exchanges would hold special enrollment period for those people running from March 15 through the end of April, and most other states joined in as well.
But the plan seems to have largely fizzled, or at least underperformed.
Only about 147,000 people signed up in the 36 federal exchanges. Another 100,000 or so signed up during the extra time in other states. In some places, the response rate was particularly weak: Hawaii, for example, didn't sign up a single person during its extended enrollment period. Not a solitary one—there were literally zero takers.
It is merely the latest ominous sign for Hawaii's exchange, which received more than $200 million in federal grants. And it is the most dramatic recent illustration of the ways that Obamacare's state-run exchanges continue to struggle well into the law's second year of full-on implementation.
Hawaii's Health Connector has struggled from the get-go, and for the last several months, the state-run insurance hub has appeared to teeter on the edge of existence. The state closed down the exchange for weeks as a result of technical problems following its initial launch in October, 2013. And over the last two months, reports have increasingly pointed toward the possibility that it may be shut down permanently due to lack of funding.
Hawaii's governor, Democrat David Ige, has admitted that the state currently has no way to fill what The Hill described last week as "a major funding shortage"—about $28 million over the next seven years, according to The Washington Post—compounded by ongoing technical malfunctions. If the state cannot prove that its exchange is workable and sustainable, it will eventually have to switch over to a federally run exchange, much like Oregon, another state that spent hundreds of millions in federal grant money on an exchange that ultimately failed. Both Ige and federal health bureaucrats are still officially holding on to the possibility that Hawaii's exchange might be able to stand on its own, but technical troubles still plaguing the sign-up system and no funding in place, it's hard to see how. The state admitted earlier this month that it had drawn up contingency plans for a shutdown.
Hawaii's exchange is hurting for cash more than any other of the other state-run websites, but it's hardly alone in struggling for cash. Earlier this month, The Washington Post reported that "nearly half of the 17 insurance marketplaces set up by the states" and D.C. under Obamacare are "struggling financially," in ways that present "an unexpected and serious challenge" to the ongoing operations of the health law. "Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers," the Post report said, leaving exchange officials to hunt for ways to pay for their systems.
Part of the problem is that the federal grant money that helped fund the development of the exchanges, and maintain them through their initial operating periods, has run out. Even if states put some away in savings, it's not clear they can use it: Medicare's Inspector General has warned that the use of these funds for regular operations appears to be illegal.
But in other ways, operations now appear more expensive than expected. In Colorado, the exchange's call center was supposed to cost $13.6 million this year, according to the Post. New estimates put the cost at more than $21 million. As a result, the state is currently considering a major hike in the per-policy fee assessed to insurers selling on the exchange, more than doubling it from 1.4 percent to 3.5 percent. Technically it's a fee on insurers, but consumers end up footing the bill.
How does all this get resolved? For now, it's in something of a holding pattern. The troubled state-run exchanges might move to the federal exchange (some, including Minnesota and Vermont, are openly considering it), but reports from just a few months ago indicate that technical troubles persist behind the scenes with the federal exchange—and, more importantly, there's the looming Supreme Court decision regarding whether the federal exchanges can legally issue subsidies. No state will want to make any big decisions about its exchange before the ruling comes down.
The persistent troubles with the state-run exchanges, meanwhile, could complicate matters in the aftermath of a High Court decision as well. If SCOTUS rules against the administration, there will be a fair amount of pressure on states that never built their own exchanges to do so. But with so many state-run exchanges still flailing, that may not be a particularly easy or appealing choice, especially since the states that opted out were generally wary or outright opposed to Obamacare to begin with, and since there's no longer any federal funding to build new state-run exchanges—much less the generous, essentially open-ended stream of federal dollars that helped build the first round of state-run insurance portals.
Regardless of what the Supreme Court decides, none of this reflects particularly well on Obamacare or its backers. The states running their own exchanges were lavishly funded with federal grants, and they were the most politically gung-ho about the law. But even with practically limitless outside funding to get started, many of the law's most ardent supporters have yet to make it work, or convert more-or-less working exchanges into financially sustainable entities. In any case, Hawaii's ailing exchange and its financially struggling state-run siblings offer a reminder that Obamacare's failures and frustrations are far from over.